5 Trends That Will Keep Real Estate Growing in 2016

 

A report about the real estate trends for 2016 has been released by Pricewaterhouse Coopers and the Urban Land Institute on Wednesday.

According toconstructiondive.com, commercial real estate will soon be dominated by small- scale building firms as companies with less than 50 employees surpass the growth of large- scale construction firms.

Mitch Roschelle, a partner at PwC, said "The real estate industry's traditional focus on big cities and large employers is shifting significantly as small businesses emerge as the growth engine for the U.S. economy. This is creating disruption in the office sector as it finds ways to create new space models to accommodate these employers."

The trend report is the result of varius interviews and surveys with different real estate professionals and firms. Below are some of the top real estate trend for 2016 according to Pricewaterhouse Coopers and the Urban Land Institute's report.

 

1.       Real estate industry will see success in "18- hour cities"

-          "18- hour cities" are the place known as secondary market. Several reports have shown that these secondary market are starting to gain momentum as real estate investors are turning their gazes to these markets. These market entice investors for it can offer the same urban amenities a company requires but for a cheaper price. These secondary markets are San Antonio, Denver, Austin and the like.

2.       Office sector will continue to grow

-          As the number of employees grow, so as the office buildings needed to house the business. Also, expansion of companies from different industries open an opportunity for real estate investors selling or leasing office spaces to gain more profit. Laos, redesigning office spaces is becoming part of the company's way of introducing their brand resulting to renovations and acquiring new spaces to better suit their business.

3.       Suburban properties are making a comeback

-          For years, acquiring properties or investing in suburbs has been feared by the investors as lack of market might kill off their business. However, recent reports showed that millennials are starting to look into living in suburbs to take a major life step of having a family. Developers are now looking into offer features that will both benefit the urban and suburban areas of a certain town. This includes mixed used properties and transit- oriented real estates.

4.       Food production in urban areas

-          People in cities are starting to look into having access to fresh food which made the use of urban property to produce food has becoming a trend nowadays. One example of this is the three hydroponic operations in Brooklyn and Queens that produce more than 300 tons of vegetables. The report also said "Just as the reinvention of the suburbs is an emergent story for the decade ahead, so is the creative adaptation of inner-city uses."

The report also detailed other trend that might be a trend though some of it are still going through extensive observation and research to fully identify if these trends are going to change the face of real estate industry.

Shortage of Inventory Will Keep California Home Prices Rising in 2016

 

California’s housing market is expected to improve in 2016, but a shortage of available inventory and continuing high costs are expected to limit the improvement, according to a report released Thursday by the California Association of Realtors.

According to CAR's 2016 California Housing Market Forecast, existing home sales are expected to rise in 2016 by 6.3% over 2015’s expected total.

Additionally, existing home sales are expected to hit 407,500 in 2015, which would also represent a 6.3% increase over 2014, when there were 383,300 existing home sales.

CAR’s forecast calls for existing home sales to rise to 433,000 in 2016.

The state’s rising prices are predicted to hold back home sales slightly. The California median home price is projected to increase 3.2% to $491,300 in 2016, following a projected 6.5% increase in 2015 to $476,300.

 

Despite those increasing prices, 2016 is still estimated to have the slowest rate of price appreciation in five years.

CAR’s forecast projects growth in the U.S. gross domestic product of 2.7% in 2016, after a projected gain of 2.4% in 2015.

With projected nonfarm job growth of 2.3% in California in 2016, the state’s unemployment rate should decrease to 5.5% in 2016 from 6.3% in 2015 and 7.5% in 2014, the CAR forecast said.

Additionally, the CAR forecast projects the average interest rate for the 30-year, fixed mortgage will climb only slightly to 4.5%, but should still remain at historically low levels.

With a statewide market as diverse as California, some areas will see the effects of those changes more than others, according to CAR President Chris Kutzkey.

“Solid job growth and favorable interest rates will drive a strong demand for housing next year,” Kutzkey said.

“However, in regions where inventory is tight, such as the San Francisco Bay Area, sales growth could be limited by stiff market competition and diminishing housing affordability,” Kutzkey continued. “On the other hand, demand in less expensive areas such as Solano County, the Central Valley, and Riverside/San Bernardino areas will remain strong thanks to solid job growth in warehousing, transportation, logistics, and manufacturing in these areas.”

CAR Vice President and Chief Economist Leslie Appleton-Young said that there may be a shift in sales to more inland areas of the state in 2016.

“The foundation for California’s housing market remains strong, with moderating home prices, signs of credit easing, and the state continuing to lead the nation in economic and job growth,” Appleton-Young said.

“However, the global economic slowdown, financial market volatility, and the anticipation of higher interest rates are some of the challenges that may have an adverse impact on the market’s momentum next year,” Appleton-Young added. “Additionally, as we see more sales shift to inland regions of the state, the change in mix of sales will keep increases in the statewide median price tempered.”